The U.S. and Korea Should Be Bold in Their Investments

In selecting the construction of an LNG power plant in Texas as the initial project under its investment agreement with the United States, South Korea focused on commercial viability. While ensuring commercial viability is essential for safeguarding Korean taxpayer funds, the United States is pressuring South Korea to quickly commit to additional large-scale energy projects. However, rather than focus solely on the energy sector, Seoul and Washington should dedicate a portion of the funds to projects that will improve national security and supply chain security even if they entail accepting some commercial risk. This is especially critical at a time when China has demonstrated a willingness to exploit supply chain vulnerabilities for economic coercion.

Since announcing the LNG power plant in Texas, the Trump administration has unilaterally announced agreement on additional energy projects related to the construction of eight nuclear power plants and an LNG pipeline in Alaska. While each of these projects is under consideration, Seoul disputes that any final agreement has been reached. President Trump also announced that South Korea has agreed to fund an $8.4 billion oil recovery project, a project that Seoul contends was not under consideration. Each of these announcements appears timed to increase pressure on South Korea and provide domestic political wins related to energy prior to the U.S. mid-term elections, where energy costs have become a significant issue.

These politically driven announcements highlight the need to ensure projects are commercially sound, as well as a deeper discussion of what projects might provide broader national security and supply chain benefits that warrant taking on greater risks. Before expanding the portfolio of projects, Seoul and Washington should examine the commercial risks in the existing Texas project and deeper risks in the energy projects under consideration. The Texas plant has struggled to secure the power purchase agreements it needs to secure adequate demand for profitability. With Texas also suspending new permits for data center grid and environmental reviews for auditing, it may take longer than expected to secure those agreements.

The issues in Texas may prove temporary, but there is increasing risk in investing in power to support data centers. Approximately half of all planned data centers in the United States have been delayed or cancelled, with 30 states in the process of putting in place new rules which would make construction more difficult. Opposition to AI data centers is one of the few issues where the majority of Republicans and Democrats agree.

Even if the political issues are solved, is building power plants for data centers the best use of a once-in-a-lifetime injection of investment into the U.S. economy? The United States already accounts for 75 percent of the world's AI compute. That lead is unlikely to diminish. Goldman Sachs estimates that major U.S. tech firms will invest $581 billion on AI infrastructure in the United States this year alone, with even higher levels next year. In contrast, the Chinese government and companies such as Alibaba are investing roughly half that amount over multiple years.

There is no question that AI will require massive new power generation. Goldman Sachs projects that by next year, the electricity needed to run AI data centers will have doubled from 2025 levels. But if Seoul invests too heavily into powering AI data centers, it runs the risk of appearing to subsidize the largest and most profitable U.S. companies at a time when Amazon, Google, Meta, and Microsoft have pledged to finance the power generation their data centers require.

Some investment in the U.S. energy sector will likely be needed to address South Korean concerns about returns on its investment, even in a riskier environment. However, because of these uncertainties, South Korea and the United States should think more creatively on how to utilize the remaining funds. Legislation passed by the South Korean National Assembly earlier this year requires investments to be commercially viable, but it also includes an exception for projects that provide strategic benefits to national security or supply chain stability.

The energy sector is a natural place to start thinking more creatively given the strength of both countries’ nuclear sectors. The eight planned nuclear power plants are expected to rely on established U.S. and South Korean reactor designs, but small modular reactors (SMRs) should be part of the plan. This new technology is expected to be faster to construct than legacy nuclear power plants, have lower upfront costs, provide non-proliferation advantages, and greater operational flexibility. Investing in SMRs for some of the plants rather than traditional reactors for all eight would demonstrate the commercial viability of SMRs and potentially open new export markets for advanced nuclear technologies.

Critical‑minerals processing is another promising area. Despite significant U.S. investment in this space, China’s dominance is set to only decline by a small percentage by 2035. China’s control of critical minerals represents a clear national security risk and supply chain vulnerability to both nations. Beijing has already used its control over critical minerals as leverage in trade talks with the United States and as a tool to pressure Japan over Prime Minister Sanae Takaichi’s comments on defending Taiwan. It has also blacklisted potential U.S. and European rivals to slow their efforts to break Beijing’s dominance.

According to the Colorado School of Mines, the United States already mines enough minerals to meet domestic needs, but the United States lacks processing capacity. Combined with the Trump administration’s decision to prohibit the export of shredded battery material and scrap tungsten, investments in processing and recycling capacity would strengthen both national security and supply chain security. 

In the national security space, the Iran and Ukraine wars have exposed gaps in the U.S. defense industrial base. Relatively small investments have the potential to have significant impacts to address these concerns. For example, one bottleneck holding back the production of ballistic missile interceptors is a shortage of specialized precision ball screws. This gap could be filled either through investment from South Korea’s funds in expanding existing production in the United States or a greenfield investment in bringing a South Korean firm, in collaboration with a U.S. defense contractor into the supply chain. Supporting expanded production in this and other parts of the defense industrial supply chain could improve national security for both the United States and Washington by filling critical gaps in the defense industrial base supply chain.

Washington and Seoul should also look beyond established technologies and support promising emerging technologies that could give both countries an advantage over China. These include direct lithium extraction, silicon-carbon anodes, iron nitride magnets, and new rare-earth processing techniques. They could achieve this by establishing a new investment fund for critical and emerging technologies that would support firms in energy and minerals spaces, but also other key sectors such as defense and advanced materials.

Investing in emerging technologies comes with risks. Some will fail. This is why the initial projects Seoul and Washington select need to be commercially viable. But establishing a new fund to take a portfolio approach to providing the capital needed to commercialize or establish the feasibility of new technologies would hold significant benefits. New technologies can help break China’s dominance of the critical minerals supply chain, improving both national security and supply chain security, while also creating new markets for U.S. and South Korean products. 

South Korea’s investment fund needs projects that will generate steady returns, but the real strategic value will come from taking bold investments in technologies capable of reshaping markets, improving national security, and strengthening supply chains for decades to come. If Seoul and Washington fail to seize this moment to think strategically, they will leave both economies exposed to continued economic coercion from Beijing.